Test bank for foundations of business 4th edition by pride

LEARNING OBJECTIVES: FOBU.PRID.15.1-1 NATIONAL STANDARDS: United States - AACSB: Reflective Thinking TOPICS: Your Future in the Changing World of Business KEYWORDS: Bloom's: Applicati

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Test Bank for Foundations of Business 4th Edition by Pride

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LEARNING OBJECTIVES: FOBU.PRID.15.1-1

NATIONAL STANDARDS: United States - BUSPROG: Analytic

TOPICS: Your Future in the Changing World of Business

2 How can online networking improve your chances of success in the business world?

ANSWER: Answers will vary It may be best to make the most of online networking by

identifying and joining sites where you can connect with prospective employers, current and former classmates, and others who may help you spread the word of a job search Online networking can also advance your career by being a part of sites such as Facebook, Twitter, and LinkedIn, among others

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3 An entrepreneur combines four kinds of resources into a business What would be the effect on the business if anyone were left out?

ANSWER: The four kinds of resources include material resources (raw materials), human

resources (people), financial resources (capital and money), and informational resources (information to make decisions and to evaluate a firm’s activities) Every business must work to organize these four resources If one resource is not available

or is left out, the business will, most likely, fail since it is the combination and balancing of the four resources that creates business success For example, a manufacturer cannot produce products if there are no raw materials And the other three resources are just as important

4 What is profit and why is it important to a business?

ANSWER: Profit is what remains after all business expenses have been deducted from sales

revenue Sales revenue is the money received from customers in exchange for goods

or services In addition, all businesses have expenses which are deducted from revenue, thus, leaving the profit A negative profit, called a loss, cannot be sustained long term for a business to survive If a firm is operating at a loss, management must take action to eliminate the loss, increase sales, and reduce expenses or the firm may

be forced to file for bankruptcy protection or go out of business

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5 What three activities must a business perform in order to be successful? Briefly describe each of these and why each is essential to business success.

ANSWER: A business is the organized effort of individuals to produce and sell, for a profit, the

goods and services that satisfy society’s needs For a business to be successful, it must (1) be organized; (2) make a profit on the goods or services it sells to its customers; and (3) meet the needs of its customers If one or more of the three elements is missing, the business will not be a success

6 Explain how the notion of scarcity is related to personal as well as business decision making.

ANSWER: Answers will vary Scarcity refers to the lack of resources—money, time, natural

resources, etc.—that are needed to satisfy a want or need Because resources are always scarce, businesses as well as individuals must make decisions based on resource availability Personal decisions such as whether to buy a $5,000 used car versus a $18,500 new car are usually driven by the scarcity of resources and the ability to pay based on the scarcity Business decisions are similar

NATIONAL STANDARDS: United States - AACSB: Reflective Thinking

KEYWORDS: Bloom's: Application

7 Explain how the basic economic questions are answered in capitalistic and command economies

ANSWER: The four basic economic questions are (1) what goods and services will be produced;

(2) how will they be produced; (3) for whom will they be produced; and (4) who controls the factors of production In a capitalistic economy, supply and demand is primarily driven by the market and what price a product or service will bring In a capitalistic economy, businesses and individuals answer the four basic economic questions In a command economy, the government decides what goods and services will be produced, how they will be produced, and at what price they will be offered

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8 Why do we say that the U.S economy is a mixed economy?

ANSWER: The United States economy exhibits elements of both capitalism and socialism, and,

therefore, can be deemed a mixed economy The U.S government, for example, participates in the economy as more than simply an umpire or rule maker The U.S government participates in the four basic economic questions—what, how, for whom, and who For example, the government is involved in public schools, social services including subsidized childcare or job-search assistance, and public-private partnershipssuch as with hospitals or research institutes

9 How does socialism differ from communism?

ANSWER: In a socialist economy, the key industries are owned and controlled by the

government Private ownership of smaller businesses is often permitted in socialisteconomies In a communist society, all workers contribute to the economy throughgovernment ownership, and management In a communist economy, the four basiceconomic questions—what, how, for whom, and who—are answered through centralized government plans

10 Why is productivity important? How can a nation's productivity rate be improved?

ANSWER: Productivity is the average level of output per worker per hour An increase in

productivity results in economic growth because a larger number of goods and services are produced by the labor force Increased productivity growth helps an economy’s businesses to compete more effectively in the global environment due tomore goods or services being produced at a lower cost Productivity rates can be improved through technology, advanced employee training, as well as transferring routine functions to other locations, possibly through the Internet

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11 A nation's economy fluctuates instead of growing at a steady pace every year These fluctuations are generally referred to as the business cycle Describe the four different phases of the business cycle.

ANSWER: The business cycle generally includes four phases: the peak, sometimes called

prosperity; recession, two or more consecutive three-month periods of decline in a country’s GDP; the trough, the turning point when a nation’s production and employment bottom out and reach their lowest levels; and recovery, sometimes called

expansion

12 What is the difference between monetary policies and fiscal policies? How does each affect the nation's economy?

ANSWER: Monetary policies are the Federal Reserve’s decisions that determine the size of the

supply of money in a nation and interest rate levels Fiscal policy is determined by government’s influence in the amount of savings and expenditures of individuals, businesses, and government by altering the tax structure and changing the levels of government spending Some experts believe that effective use of monetary and fiscalpolicies can speed up recovery and reduce the amount of time the economy is in recession

13 In perfect competition, who sets the price of a product?

ANSWER: In perfect competition, there are many buyers and sellers of a product or service and

no single buyer or seller is powerful enough to affect prices Therefore, the actions ofbuyers sets the price of a product since, in theory, all products are the same and buyers will pay the lowest price for the same products

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14 Describe how supply and demand affect the price of a product.

ANSWER: The supply of a product is the quantity of the product that producers are willing to sell

at each of various prices Suppliers supply more product when consumers are willing

to pay a higher price The demand for a product is the quantity that buyers are willing

to purchase at various prices Buyers demand more when a price is low Shifts in demand for a product raise and lower the market price Also, a change in the supply

of a product can cause a change in the price for the product

15 In a monopolistic competition setting, how can a manufacturer differentiate a product?

ANSWER: Sellers attempt to differentiate their product or service so it is attractive to consumers

Product differentiation is the process of developing and promoting differences between one’s products and all competitive products For example, sellers provide unique product features, attention-getting brand or product names, unique and attractive packaging, and services such as free delivery or a lifetime warranty

16 How does a monopoly have complete control over the price of its product?

ANSWER: A monopoly has some control over the price of its product because it is the only firm

in the industry No firm, however, can set its price at some astronomical figure simplydue to lack of competition The firm would find that no customers would be willing to pay an exorbitant price Therefore, the firm in a monopoly position must consider the demand for its product and set the price at the most profitable level

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17 What effect did the Industrial Revolution and the golden age of invention have on the development of Americanbusiness?

ANSWER: In the late 1700s, the factory system of manufacturing was born in which all

materials, machinery, and workers required to manufacture a product were assembled

in one place Specialization was also introduced during the Industrial Revolution Specialization is the separation of a manufacturing process into distinct tasks and the assignment of different tasks to different individuals The years of 1820 to 1900 were considered the golden age of invention and innovation in machinery Many basic characteristics of the modern business system took form during these time periods

18 What do you consider the most important challenges that American business faces today?

ANSWER: Student answers will vary The need to create a stable economy with the creation of

new jobs will likely be a continual challenge for the U.S Regulation of banks, savingsand loan associations, credit unions, and other financial institutions to prevent abuse will continue to be a challenge Other challenges include reducing national debt, defeating terrorism, and resolving conflict with other countries Using technology to make workers more productive and competitive, preserving small business benefits in

a global environment, balancing economic growth with sustainability, and meeting theneeds of two-income families, single parents, older Americans, and the less fortunate will also continue to challenge American business

KEYWORDS: Bloom's: Evaluation

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After a lot of consideration, Jonathan decided to open his own business called Universal Communications and hireemployees that reflected a more diverse customer base He was happy to have this opportunity because it was a dream that he had always had He had always wanted to make his own decisions about what his company would produce and how The only aspect of the business he was unsure of was pricing, yet he knew this would be important for his ultimate success.

19 Refer to Satellite Communications Jonathan is operating in a

and how to do things

20 Refer to Satellite Communications When hiring people, Jonathan thinks it is important to consider

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21 Refer to Satellite Communications Now that Jonathan plans to open his own business, he needs to look at the

factors of production Which of the following is not a factor of production?

22 Refer to Satellite Communications Jonathan's success will contribute to society This is referred to as the

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Home Inspirations

Hailey works for her father in a family-owned business called Home Inspirations, a bedding company that has been

in operation since the 1800s When her father retires, Hailey plans on taking over the business Hailey is aware of many things about the company that she likes, and a few things that she does not She has particularly noted that when the economy has low unemployment and high total income, sales are great However, any other time, sales are not so good

Currently, all of the bedding items are created in one place and everyone works on various tasks every day Hailey

is thinking about streamlining the production process so that individuals would be responsible for only one task Shebelieves that if production would increase, she could sell her products at a lower price and increase revenue She knows that most bedding products available in the market are very similar in nature and satisfy the same need However, if she were able to lower prices, this might give her company the competitive advantage that it needs She would then be able to invest money in differentiating her products by providing unique features, building thebrand name, and offering services such as free delivery She is also considering selling her products on the Internet.Hailey knows that her father does not like change very much, but she feels these changes are important for the future of the company

23 Refer to Home Inspirations Hailey noticed that when sales were up, the economy was in a

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24 Refer to Home Inspirations Home Inspirations currently operates in a environment

25 Refer to Home Inspirations Hailey feels that for productivity to improve, the company must practice

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26 Refer to Home Inspirations Hailey's goal of offering products with unique features and special services is called

27 When an individual chooses his or her ideal career, it is most likely a reflection of one's

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28 Chris chooses to work only thirty hours a week as an engineering assistant while trying to shield himself fromadditional responsibilities at work Chris seems to value

a recognition and rewards

b the opportunity to help others

c promotions and transfers

d more free time

29 Of the following, which is not considered a basic management function necessary to be an effective manager?

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30 Cultural diversity represents

a a business theory that is no longer valid

b the differences among people in a workforce

c a technical skill

d a statistical method used to project sales revenues and profits for global companies

e a religious issue that doesn't affect business organizations

31 Shawn Sine decides to start his own business How likely is Shawn to still be operating a successful business inseven years?

a It depends on whether it is an e-business or not

b It is very likely because most small businesses are successful

c It is likely because the chance of failure is nearly equal to the chance for success

d It is unlikely because over half of all new small businesses fail

e It is very unlikely because almost all new businesses fail within the first three years

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32 The ability for a manager to think in abstract terms while envisioning the “big picture” falls into the category of , deemed an important management trait

TOPICS: Your Future in the Changing World of Business

KEYWORDS: Bloom's: Knowledge

33 The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’sneeds is called

TOPICS: Business: A Definition

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34 Raw materials, buildings, and machinery are resources

35 All of the following are material resources for Toyota Motor Company except

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36 resources include the funds needed to pay wages, purchase raw materials, and operate a business

37 resources are the individuals who provide labor for an organization in exchange for wages

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38 The monetary contributions that the owners of IBM pay for shares of the company's stock are

resources for

39 What resourc

e tells the manage

rs of a busines

s how effectively the other three resourc

es are being combin

ed and used?a

Technical

b

Humanc

Finan

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40 Organizations that combine raw materials, machinery, and labor to produce goods are called

41 Which of the following companies is an example of a manufacturer?

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42 Mondie Weller decides to start a residential landscaping business How would this business most likely be

KEYWORDS: Bloom's: Comprehension

43 A business’ efforts to sustain the planet and their participation in ecological movements are part of a firm’s

a free enterprise system

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44 Best Buy stores would most likely be classified as

45 A local retailer calls its customers when it receives merchandise that they may be interested in, provides individualservice to each customer, provides forms and phone numbers for complaints and comments, and has a 100 percentsatisfaction guarantee Which objective is this business working hard to accomplish?

a Making a profit

b Achieving low employee turnover

c Satisfying the needs of its customers

d Increasing the owner's wealth

e Keeping up with the current technology

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46 The ultimate objective of every firm, such as IBM, Hewlett-Packard, JC Penney, and Cengage Learning, must be to

a sell either to other firms or to consumers

b satisfy the needs of its customers

c pay out money to cover the various expenses of doing business

d know that people generally buy a product and store it

e make it impossible to satisfy customers

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

REFERENCES: p 9

47 In the mid-1970s, American auto manufacturers produced big gas-guzzling cars and tried to sell them to consumerswho needed fuel-efficient transportation This happened because manufacturers

a lost sight of consumers' needs

b attempted to satisfy consumers' needs

c followed consumers' wants too closely

d knew the economy would rise again

e did not expect a profit

ANSWER: a

POINTS: 1

DIFFICULTY: Challenging

REFERENCES: p 9

KEYWORDS: Bloom's: Application

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48 When a firm's sales revenues are greater than its expenses, the firm has a

49 When a firm's expenses are greater than its sales revenue, the firm has a

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50 The relationship between sales and profits can be written as

a sales revenues + expenses = profit

b loss + profit = sales revenue

c profit − expenses = sales revenue

d expenses + loss = sales revenue + profit

e sales revenue − expenses = profit

ANSWER: e

POINTS: 1

DIFFICULTY: Moderate

REFERENCES: p 9

51 During 2013, Just-the-One Jewelry had sales revenues of $1,500,000 This retailer also had expenses that totaled

$800,000 What is the firm's profit or loss amount?

KEYWORDS: Bloom's: Application

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52 Andrew Cooper decides to become a part owner of a corporation As a part owner, he expects to receive a profit

as payment because he has assumed the risk of

a serious inflation eroding the purchasing power of his investment

b being paid before the suppliers and employees are paid

c losing his home, car, and life savings

d losing the money he has invested in the corporation and not receiving profits

e the company giving all of the profits to local communities

53 At the end of the year, an individual, small business owner has made $65,000 in profit Who does that profit belong to?

a The company's CEO and top managers

b The banks from which the business borrowed money

c All employees of the small business

d The consumers of the business’ products

e The owner of the business

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54 For a business, stakeholders represent

a investors in the business

b lenders that have provided loans

c suppliers that have extended credit to the firm in search of profit for the firm

d employees who work for the firm

e all of the different people or groups who are affected by the business

55 is the study of how wealth is created and distributed

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56 Microeconomics is the study of

a global economies

b the entire U.S economy

c the decisions made by individuals

d the national unemployment rate

e productivity in other countries

57 The study of an individual's economic decisions would be an example of

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58 When economists study the national economy or global economy, they are using a(n) approach

59 According to economists, natural resources, labor, capital, and entrepreneurship are called

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60 A natural resource, as recognized by economists, would include which of the following?

61 The work performed to produce goods and services is referred to as

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62 Matt Newell, a former Air Force pilot, decides to operate a helicopter tour company to provide customers with breathtaking views of the Rocky Mountains He obtains a loan and purchases the necessary land, facilities, advertising, and five helicopters for his business What important factor of production has he overlooked in creatinghis business?

63 Capital or capital goods as recognized by economists would include all of the following except

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64 Steve Wilson, a chef at a major restaurant in San Francisco, wants to start his own restaurant He surveys the market, finds a suitable location, and calculates how much money he will need to lease the building and purchasethe necessary equipment and supplies Steve visits his banker and requests a loan The money Steve will receivefrom the loan and the resources he will purchase with it are known as

65 For a Pepperidge Farm production facility, managers and employees would be

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66 A person who risks his or her time, effort, and money to start and operate a business is called a(n)

67 Diane is passionate about soccer and decides to open her own soccer sporting goods store She invests her money,

time, and effort into making the store a success Diane can be best described as a(n)

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68 Which of the following scenarios would best exemplify Adam Smith's view of best serving the interests of society?

a Individuals are selected to fill certain positions within the economy of their nation according to the needs

of the nation as a whole

b Markets are carefully regulated to ensure that all individuals within a nation are treated fairly and chargedstandardized prices

c A country only has a limited amount of space for college students and uses a type of lottery system to

determine who gets these spaces

d Government scarcely exists in this country, and transactions are based on a system of barter, or trading

goods, for other goods

e Individuals in the country may pursue their own economic gain and self-interest by doing whatever is best forthem

69 Which of the following is not a feature of laissez faire capitalism?

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70 An economic system in which individuals and businesses make the decisions about what to produce and what tobuy, and the market determines how much is sold and at what prices, is called a economy.

71 Olan Okowo recently moved to the United States with many hopes and dreams However, he realizes that

economic freedom includes all of the following except the right to

a guaranteed economic success

b use owned resources to produce a profit

c accept or reject any job offered

d sell a product at the price chosen

e buy any economic good or service producers sell

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72 In Adam Smith's view, which of the following is not the role of government in business?

a Providing defense against foreign governments

b Regulating business activity

c Ensuring internal order

d Furnishing public works

73 The United States, whose economy exhibits elements of both capitalism and socialism, has what is known as a(n) economy

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74 All of the following would typically be considered consumer products except a

a 2-liter of Coke

b DVD player

c prom dress

d high-powered drill press

e bag of dog food

75 Approximately what portion of our nation's total production is made up of consumer goods?

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76 Which of the following represents the biggest customer of American business?

77 Households provide all of the following resources to businesses except

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78 When consumers spend their money to purchase Apple iPhones or computers with an Intel processor, or when theydiscontinue buying such items as compact discs, they are telling resource owners

79 Gail Nelson begins her first job after graduating from college and starts putting money away in a savings account.She believes she has removed this money from the circular flow between buyers and sellers that she studied inIntroduction to Business Is Gail correct?

a Yes, by putting this money into a savings account, only she has access to the funds and they are no longeravailable to the circular flow

b No, even though she has saved this money, the bank will in turn invest the money back into the circular flow

c Yes, only direct investments into companies, such as purchasing ownership shares of that company, will puther savings back into the circular flow

d Yes, the circular flow focuses on businesses and government, and therefore Gail's savings have no impact on the circular flow

e No, because she earned this money from a company and because she paid taxes on it, it is always

considered part of the flow

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80 For the U.S government to provide services, it collects revenue from

a only individuals in the form of taxes

b only corporations in the form of taxes

c selling bonds to foreign governments

d both households and businesses in various forms of taxes

e selling manufactured goods overseas

81 The government uses tax dollars to

a invest in foreign bonds

b invest in foreign corporations

c purchase resources and products needed to provide services

d purchase other nations

e increase consumer income

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